MetroPCS Said to Become Frontrunner for AT&T-T-Mobile Assets

Pedestrians pass a MetroPCS Communications Inc. store in San Francisco, California. MetroPCS had 9.1 million wireless subscribers at the end of June, compared with more than 100 million for Verizon Wireless, the country’s largest operator. AT&T reported today that it had 100.7 million subscribers at the end of September. Photo: David Paul Morris/Bloomberg

Oct. 21 (Bloomberg) -- MetroPCS Communications Inc. has
emerged as the frontrunner to buy assets from AT&T Inc. and T-Mobile USA Inc. as those companies seek to win government
approval for their $39 billion merger, according to people
familiar with the matter.

Though the size of the deal isn’t yet definite, it would
likely include subscribers and wireless spectrum, said the
people, who couldn’t be identified because the talks aren’t yet
public. The deal’s value is likely to be less than $4 billion,
said one person.

AT&T approached smaller rivals including Dallas-based
MetroPCS, Leap Wireless International Inc. and Dish Network
Corp., people familiar with the matter said last month. Though
Leap is still in talks with AT&T, MetroPCS, with more than $2
billion in cash and short-term investments, has a stronger
balance sheet, the people said.

As part of the deal, Deutsche Telekom is prepared to help
MetroPCS with financing, said one of the people.

Jonathan Chaplin, an analyst at Credit Suisse Group AG,
said a MetroPCS purchase is logical since the company needs
spectrum and could trim capital costs if a deal goes through.

“A transaction could be transformative,” Chaplin said in
a research note, adding that the value of a deal is likely to be
less than $2 billion.

MetroPCS Subscribers

AT&T is seeking ways to salvage its agreement to buy T-Mobile USA from Bonn-based Deutsche Telekom AG after the U.S.
Justice Department sued on Aug. 31 to stop the deal. The talks
with MetroPCS may not lead to a deal, and the Justice Department
may also deem the remedies insufficient, the people said.

“Spinning off some of T-Mobile’s customers or network
doesn’t really remedy the government’s issue with the merger,
which is that T-Mobile is such a disruptive and significant
competitor that anything which makes them no longer independent
would be unacceptable,” said Glenn Manishin, a lawyer with
Duane Morris LLP in Washington. “It’s unlikely that sufficient
assets could be transferred to any of the regional players to
make them into a national network.”

MetroPCS had 9.1 million wireless subscribers at the end of
June, compared with more than 100 million for Verizon Wireless,
the country’s largest operator. AT&T reported today that it had
100.7 million subscribers at the end of September.

AT&T and MetroPCS aim to meet within the next two weeks
with the Justice Department to determine whether the remedies
will satisfy the regulator, said two of the people.

Drew Crowell, a MetroPCS spokesman, and Michael Balmoris,
an AT&T spokesman, declined to comment on any potential deal.

Shares Climb

MetroPCS rose 1.8 percent to $9.19 at the close in New
York, and is down 27 percent this year. AT&T gained 0.5 percent
to $29.13, and is little changed this year.

MetroPCS this month told regulators it would be
“premature” to block AT&T’s proposed acquisition of T-Mobile
USA. Mark Stachiw, a MetroPCS executive, made the statement in
an Oct. 13 meeting with Federal Communications Commission
officials, according to a filing posted on the agency’s website
this week.